By Michelle Morris on 16/11/2021 06:00:00

Limited Company

When you form a limited company there are a lot more factors to consider than when you operate as a sole trader.

We’re all used to seeing ‘Ltd’ or ‘Limited’ after a company name, but what does it actually mean?

When you form a limited company there are a lot more factors to consider than when you operate as a sole trader.

If you’re creating a limited company on your own, you will become a ‘Sole Director’ with 100% responsibility for all the paperwork, accounting and legal requirements. You will own the shares of your company. If there are multiple directors, you will each have your own areas of responsibility and may or may not all be shareholders too.

It’s important to note that directors don’t have to be shareholders and shareholders don’t have to be directors.

To register a limited company, you must first check the availability of your chosen business name on the
Companies House website (www.gov.uk/government/organisations/companies-house). You cannot use the same name as an existing company, so it is sensible to have some options in reserve. If a company is existing but dissolved, the name will be available. We would suggest you tread with caution if choosing the name of a dissolved business, because if they dissolved their business with unpaid debts, you may be approached when you start trading under that name.

Once you’ve registered your company name with Companies House, specifying all directors, shareholders and your company secretary, you will then need to register your business with HMRC. This is known as ‘incorporation’.

This is where we come in… Business incorporation is a service we offer. See www.ellacottmorris.co.uk/company-incorporation/ for further information.

There’s a really handy check list on the GOV.UK website that walks you through each of the steps to
setting up your limited company. Please see www.gov.uk/set-up-limited-company

But, remember – we’re here to help you every step of the way too. We can also help with each of the annual filing requirements set out below:

Corporation Tax
As a limited company you will need to pay Corporation Tax (CT600) to HMRC. This is calculated on the profits of your company. Your Corporation Tax accounting period begins as soon as you start trading – this may not be the same date as your date of incorporation. 

Annual Accounts
Your Annual Accounts (AR01) will also need to be filed with Companies House and are due 9 months after year end.

Confirmation Statement
Your Confirmation Statement (previously known as Annual Returns) contains information about your
business and its directors. Whilst you only need to file one Confirmation Statement each year, you should
file an updated statement if your business arrangements change.

VAT
If you are a Value Added Tax (VAT) registered business, you will also need to submit a VAT Return.

Director Self-Assessment Tax Return
Each company director will be required to file a self-assessment tax return each year. This is another task we can take off your hands. Once you’re up and running you’ll need to work out how you will take payment from your company. You may decide to pay yourself a salary and / or receive dividend payments. Dividends are payable from the profits after Corporation Tax and are treated as income rather than earnings, meaning there is no National Insurance (NI) to be paid. After taking into account your annual personal tax allowance, dividends are taxed at the dividends rate. These are 7.5% (basic), 32.5% (higher) and 38.1% (additional). It really is best to take professional advice regarding the most tax efficient way to take an income from your limited company. We can talk you through your options and help you come to the best decision for you and your business. As a limited company you are required to show your company name, registration number and registeredaddress (which may be the address of your business premises or your accountants) on all electronic and hard copy communication.

By Michelle Morris on 16/11/2021 06:00:00